The Fiscal Response to COVID-19 Will be Larger than the Great Recession Response
The Coronavirus Response & Relief Supplemental Appropriations Act has been passed by Congress and awaits the President's signature. Assuming the bill will be signed, Congress will have passed nearly $5 trillion of potential support in response to the COVID-19 pandemic, at a projected net cost of roughly $3.5 trillion over the next 5 years. The new bill includes more than $900 billion of support for small businesses, expanded unemployment benefits, recovery rebates, funding for schools, transportation spending, money for COVID testing and vaccines, and other spending and tax cuts.
In a previous analysis, we compared the first five COVID-response bills passed by Congress to those enacted during the Great Recession between 2008 and 2012, and found them to be similar in size as a percentage of the economy – though with very different timing. With the passage of the Response & Relief Act, COVID relief is now significantly larger.
Over the next 5 years, we estimate that the cost of the legislative response to the COVID-19 pandemic will total about $3.5 trillion, or approximately 3 percent of Gross Domestic Product (GDP) through 2024. Between 2008 and 2012, by comparison, Congress enacted roughly $1.8 trillion of fiscal stimulus and other economic support (we tracked these and other measures at Stimulus.org and detailed them in our previous analysis), equivalent to 2.4 percent of GDP.
![Cost of COVID-19 and Great Recession Responses](https://crfb.org/sites/default/files/COVID%20vs%20GR%20Update%20Chart%202_v1.png)
As noted in our previous analysis, the newly-enacted COVID-19 relief will be distributed much more quickly than the Great Recession stimulus. COVID-related fiscal support totaled more than 13 percent of GDP in 2020. We estimate it will total 3 percent of GDP in 2021 – mostly due to the Response & Relief Act – and have little net impact starting in 2022. By comparison, stimulus during the Great Recession rose from 1 percent of GDP in 2008 to above 4 percent in 2009, and continued to offer substantial net fiscal support through 2012.
![COVID-19 Response Has Been Much More Sudden](https://crfb.org/sites/default/files/COVID%20vs%20GR%20Update%20Chart%201_v1.png)
Importantly, our estimates of the cost of COVID relief are somewhat rough. The Congressional Budget Office (CBO) has not released an official score of the Response & Relief Act, and we have adjusted estimates of prior legislation to account for low take-up of payroll tax deferrals and credits.
Overall, we estimate the Response & Relief Act will boost economic output by about $600 billion through 2023, and that all six major COVID relief bills passed by Congress thus far will ultimately generate an additional $2.2 trillion of economic output over the next five years.
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This blog post is a product of the COVID Money Tracker, an initiative of the Committee for a Responsible Federal Budget focused on identifying and tracking the disbursement of the trillions being poured into the economy to combat the crisis through legislative, administrative, and Federal Reserve actions.